The Queensland Government has passed the Building Industry Fairness (Security of Payment) and other Legislation Amendment Act 2020 (QLD) (the “BIFOLA”) which is set to amend the Building Industry Fairness (Security of Payment) Act 2017 (QLD) (the “BIF Act”). From 1 October 2020, the BIF Act has implemented its first stage of amendments, and we have highlighted the key changes you should know about:
SUPPORTING STATEMENT
Contractors who engage one or more subcontractors on a project are required to include a supporting statement with their payment claim. This supporting statement is a declaration that the contractor has paid all monies owing to its subcontractors when owed. If there are outstanding monies owed to a subcontractor, this must be included in the supporting statement along with details including who money is owed to, how much money is owed and why the amount has not been paid. Failure to supply or provide misleading information within a supporting statement may carry a maximum fine of 100 penalty units.
It is important to also note that a payment claim without a supporting statement does not invalidate the payment claim and must still be responded to with a payment schedule.
FAILURE TO PAY PAYMENT SCHEDULE AMOUNT
Failure to pay an amount stipulated within a payment schedule by the due date may now carry a maximum fine of 100 penalty units.
ADJUDICATION CHANGES
There have been a few small changes to the dispute resolution process, including:
1. The definition of a complex payment claim is now an amount more than $750,000 and is no longer exclusive of GST;
2. If a claimant wishes to withdraw an adjudication application, in addition to notifying the adjudicator and respondent, the claimant must also notify the Registrar. Failure to do so may carry a penalty of 20 units; and
3. If the adjudicator decides that the respondent is required to pay an adjudication amount, the respondent has five (5) business days to make payment (or a later date if determined by the adjudicator) and must advise and provide proof of payment to the Registrar. Failure to do so may carry a penalty of 20 units.
FAILURE TO PAY ADJUDICATION AMOUNT
There are new measures designed to protect claimants receiving monies owed, especially when the respondent is insolvent or at risk of insolvency.
Penalty
The respondent has five (5) business days after the day on which the adjudicator gives a copy of the adjudicator’s decision to the respondent, or a date decided by the adjudicator, to pay the adjudicated amount. Failure to do so may carry a penalty of 200 units.
Payment withholding request
Where the respondent has failed to pay the adjudicated amount within the required timeframe, a payment withholding request (“PWR”) allows a claimant who has obtained a favourable adjudication decision to go directly to the next higher party (or a financier in the case of a principal), and request they withhold the adjudicated amount from the respondent. If the higher party contravenes its obligations, the higher party becomes jointly and severally liable with the respondent for paying the adjudicated amount to the claimant.
Charges over property
Where a claimant is a head contractor and is owed money by a principal or developer, the claimant can register a charge over property in favour of the claimant for the unpaid adjudication amount. This allows the claimant to apply to court for an order to have the property sold and the proceeds of the sale can be used to satisfy the debt owing.
TRUST ACCOUNTS
The introduction of trust accounts is designed to improve subcontractor protections and simplify the project bank account process on eligible projects. They work by separating project funds from cashflow and can assist payment to subcontractors in the event a contractor becomes insolvent. However, the rollout of the trust account regime does not commence until 1 March 2021 and will be implemented in 5 phases.
Project trust account
Each project is required to have one trust account that holds progress payments received from the principal and that may become payable to subcontractors.
Retention trust account
Each contractor is required to have one trust account, which may be established for all eligible projects, that holds cash retention amounts withheld from subcontractors. A retention trust account is compulsory for all developers and builders holding retention under a head contract and first-tier subcontracts.
There are a number of penalties, including monetary or imprisonment, for mishandling retention money, which include, intra alia:
1. Not establishing a project trust account where required;
2. Withdrawing an amount from the retention trust for any other purpose than as stated in the BIF Act;
3. Not maintaining sufficient funds in a project trust account; and
4. Failing to open a retention trust account before withholding retention from payment to a contracted party.
TAKEWAY POINTS
With the new amendments to the BIF Act, it is more important than ever before to know your obligations under the BIF Act and make payments on time to avoid large penalties. If you are still unsure of your obligations, want to know if any of the new changes apply to you or if you are chasing a debt and want to know your best option to proceed with retaining your money, feel free to contact one of our construction and building law experts.
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